FTSE 100 closes ahead
Rightmove top Footsie riser
US stocks lag
FTSE 100 closed Monday higher as trader sentiment was boosted by a possible US, China trade deal.
The UK blue-chip benchmark finished around 27 points higher at 7,134 with online property group Rightmove (LON:RMV) the top dog - up over 5% after Barclays moved its price target to 420p from 415p.
FTSE 250 was also higher - up over 11 points at 19,411.
Stocks are largely higher this afternoon due to the report that China and the US are close to reaching a trade deal," said David Madden, analyst at CMC Markets.
"Sentiment has been improving for a number of weeks now, and the latest report said that both sides are considering reducing or even removing tariffs on each other’s goods. The trade stand-off between the two largest economies in the world has weighed on sentiment in recent months, and now it might be near its end."
Meanwhile, across the pond it's a different story, with Wall Street shares falling across the board. It comes after a report from the US Commerce Department indicating a sharp 0.6% dip in construction spending in December.
Expected was a 0.3% gain. The report’s release was delayed by the government shutdown that ended on January 25.
3.50pm: FTSE 100 getting its second wind
The Footsie was back on the rise in the final hour of trading, showing a clean pair of heels to the FTSE 250.
The FTSE 100 was up 39 points (0.55%) at 7,145 while the mid-cap FTSE 250 was barely changed, up 13 points (0.07%) at 19,412.
Property listings web site operator Rightmove PLC (LON:RMV) was the top performing blue-chip after some broker comment while among the mid-caps, Metro Bank PLC (LON:MTRO) clawed back some recent losses as Bank of America revealed it had control of 6.85% of the voting rights associated with the bank’s share capital.
The former was up 5.1% and the latter up 8.2%. Metro’s chief executive officer, Craig Donaldson, recently put his hand in his pocket and bought 11,100 shares in the company at 903.23p a pop.
3.00pm: US benchmarks open higher but not as high as expected
US markets did not open as enthusiastically as expected, and the Footsie seems to have wilted a tad in sympathy.
The FTSE 100 was up 35 points (0.5%) at 7,142, 24 points below its intra-day high.
In the US, the Dow Jones was up 16 points (0.1%) at 26,042 and the S&P 500 was up 6 points (0.2%) at 2,809.
Appetite for risk was still evident, however, in the trajectory of the gold price; the yellow metal was down 1% at US$1,286.20 per ounce.
Elsewhere on the futures markets, the price of Brent crude was up 1.6% at US$66.11 a barrel.
2.00pm: US-Sino trade deal hopes still working their magic
Brexit concerns – or hopes – are taking a back seat, even in Britain, as equity bulls pin their hopes on a US-Sino trade deal.
The FTSE 100 was up 44 points (0.6%) to 7,151, with the index’s constituents containing roughly five times as many gainers as fallers.
“Donald Trump’s indirect attack on Jerome Powell over the weekend also has the potential to give equities something of a boost,” according to James Hughes at Axi Trader.
“The US President took fire at the Fed for its ongoing campaign to manage inflation – as per its remit – and if this was to have any direction over terminating quantitative tightening then stocks would have cause to cheer. Otherwise however, US economic data is relatively thin on the ground today, so sentiment will remain key,” Hughes added.
US futures markets are now pointing to the Dow Jones opening around 100 points higher and the S&P 500 11 points to the good.
Insurance giant Aviva PLC (LON:AV.) was modestly outperforming the market with a 0.9% gain, having unveiled Aviva veteran Maurice Tulloch as its new chief executive officer.
“Investors appear to be giving Aviva’s new chief executive Maurice Tulloch a reasonably warm welcome, as the shares are up, but it will be interesting to see how long they give him to make his mark in terms of the firm’s operational and stock market performance,” commented AJ Bell’s Russ Mould.
“Shareholders in the insurance giant do generally seem to be a patient lot. The firm has had just three chief executives in the last 21 years (excluding Sir Adrian Montague’s brief interim stint which has just ended) even though the share price has hardly covered itself in glory and investors suffered the indignity of dividend cuts in 2002, 2009 and 2012 – the payout now is lower in per share terms than it was two decades ago,” Mould observed.
“Despite this turgid showing, Aviva’s last three chief executives have been given an average of 7.1 years in the hot seat. That compares pretty favourably to the current average tenure of a FTSE boss, which is 5.1 years across the current crop,” he added.
12.30pm: Wall Street set to open higher
The pound has edged lower against the greenback, which has provided a small boost to the Footsie’s many big dollar earners.
Meanwhile, the Dow Jones looks set to open around 83 points higher across the pond as US investors pick up on the theme of optimism over a trade deal between the US and China.
At home, the FTSE 100 was up 51 points at 7,157, its high point of the day.
“Influenced by reports over the weekend suggesting that Donald Trump and Xi Jinping could meet at some point in March to bring the trade war to a close, the Dow Jones is looking at a 80 point rise this afternoon, one that would push it to 26100 and leave it back in the ball park of last week’s 4 month highs,” said Connor Campbell at Spreadex.
Rupert Thompson, the head of research at Kingswood, the listed UK based wealth and investment manager, goes with the flow in attributing the rebound of markets to the prospect of a US-China trade deal and also throws in the pause in Fed rate hikes as another reason for improved sentiment.
“While hopes on both fronts are likely to end up being vindicated, the good news would largely now seem to be in the price and the scope for further gains not that obvious,” he opined.
“The underlying macro backdrop is, after all, the not unworrying one of a marked and ongoing slowdown in global growth. Only if signs emerge of growth bottoming out would further gains be justified but as yet there are still few indications of this,” he added.
Thompson pointed out that mid-caps have outperformed large-cap stocks significantly in 2019 in the UK and continued to do so last week.
“They have benefited both from the recovery in risk appetite and the rise in sterling, which is a drag on large-cap due to their larger exposure to overseas earnings. While we remain underweight the UK overall due to the Brexit drag, what exposure we have is tilted towards mid-cap. If we do move further away from a No Deal [on Brexit], then mid-cap will very likely outperform further,” Thompson predicted.
Away from the FTSE 350 companies, Active Energy Group PLC (LON:AEG) was pulling up trees following news of the acquisition of a site that will be a hub for it Coalswitch operations in North America.
The shares were up almost 9% at 0.675p as the renewable energy and forestry management business said its search for a suitable site was over.
Elsewhere in the energy sector, Plexus Holdings PLC (LON:POS) said its Russian licensee has secured its first major contract to supply the proprietary POS-GRIP well-head gas exploration equipment to Gazprom.
Shares in Plexus were up 29% at 58.5p.
11.30am: Oil guzzlers hit by resurgent crude price
Having suffered a mid-morning relapse, the Footsie has resumed its upward trajectory although a rising oil price has put a crimp on some stocks.
The FTSE 100 was up 32 points (0.5%) at 7,139 but heavy oil users such as easyJet PLC (LON:EZJ), Carnival PLC (LON:CCL) and TUI AG (LON:TUI) were not participating in the advance - falls ranged from 0.8% to 0.3%- as the price of Brent crude rose 54 cents to US$65.61.
Favourable factors such as OPEC cuts and progress on US-China trade talks mean Bjarne Schieldrop, the chief commodities analyst at Nordic corporate bank SEB, believes oil prices could start to rise towards the $70 a barrel mark.
“The sell-off in oil prices last week looks more like an oil price correction after a good upturn since the low-point in late December just below $50/bl. US president Donald Trump’s renewed attack on OPEC cuts helped to release the bearish correction,” Schieldrop said.
“A number of factors including OPEC delivering on cuts, US sanctions on Iran and Venezuela, Russian oil production starting to tick lower (11.34m bl/day in February 2019 vs 11.5 m bl/day in December 2018), a lower US oil rig count and progress on the US-China trade negotiations, mean oil prices could push towards and test the $70/bl line before not too long,” he suggested.
British Airways owner International Consolidated Airlines (LON:IAG) was especially hard hit, shedding 3.3% after it said its 2019 free cash flow would be lower than last year.
While IAG was holding the Footsie's wooden spoon, property listings web site operator Rightmove PLC (LON:RMV) sits happily atop the Footsie leader-board after Barclays nudged up its price target to 420p from 415p.
Rightmove shares currently trade at around 496.45p, up 5.2%, so it is not exactly a ringing endorsement from Barclays.
10.15am: Gains are pared
The Footsie's gains are slowly being eroded, with sentiment not helped by a fall in construction activity in February.
The FTSE 100 was up 11 points (0.2%) at 7,118.
UK construction companies indicated that business activity levels fell during February, which ended a ten-month period of sustained expansion, reported IHS Markit/CIP.
IHS Markit reported that February's 49.5 reading was the first time the headline seasonally adjusted UK Construction Total Activity Index registered below the 50.0 “no-change” threshold since the snow disruptions seen in March 2018.
Aside from this brief weather-related decline in output, the latest reading was the lowest since September 2017, IHS Markit noted.
“Anecdotal evidence from survey respondents suggested that Brexit uncertainty had slowed decision-making on commercial projects and led to subdued client demand so far this year,” the report said.
“There were also reports that the more fragile housing market confidence has begun to act as a brake on residential work, which adds to signs that house building has lost momentum since the end of last year. This leaves the construction sector increasingly reliant on large-scale infrastructure projects for growth over the year ahead,” said Tim Moore, the economics associate director at IHS Markit.
David Cheetham, the chief market analyst at online trading platform operator XTB said the outlook for the construction sector is “rather bleak”.
“The decline was also larger than consensus forecasts, while a reading of 49.5 means that this indicator has once more slipped in contraction territory below the 50 handle.
“The fall last March was attributed to unseasonably late snowfall, but this time no such excuses can be rolled out, with the main reasons for this latest drop being sharp falls in both commercial building activity and civil engineering,” he said, adding that sterling seems to have taken the news in its stride on the forex markets.
On the corporate news front, activity was mercifully light among the blue-chips but mid-cap caught the eye Synthomer PLC (LON:SYNT) caught the eye, for the wrong reasons.
Results for 2018 were broadly in line with expectations, according to broker Peel Hunt, but investors were spooked by talk of softening markets in Europe and North America at the end of the year.
“Europe & North America: L4L vols -1.3% YoY, Q4 weakness attributed to customer deferrals as RM prices fell. Order book levels have normalised in Q1,” Peel Hunt said, presumably via telegram.
Translated, that becomes something like Europe & North America volumes were down 1.3% year-on-year on a like-for-like basis due to customers deferring orders as raw material prices fell.
The broker has a target price of 515p and a 'buy' recommendation; the shares were the worst performers in the FTSE 250, tumbling 8.7% to 362.5p.
To mark the departure Ray Kelvin, the CEO of Ted Baker all the stores should have Not Changing Rooms— Johnfromsoho (@johnfromsoho) 4 March 2019
Ted Baker PLC (LON:TED) shares reacted positively to the news that founder and former boss Ray Kelvin has fallen on his sword.
The shares were up 2.2% at 1,934p.
9.35am: Construction activity falls for the first time since "The Beast from the East"
IHS Markit/CIPS's Construction Purchasing Managers' Index (PMI) has fallen below the level that separates expansion and contraction.
The February reading was 49.5, down from 50.6 in January. It was the first reported fall in construction activity in 11 months.
UK #Construction #PMI indicates renewed decline and increased likelihood of sector falling into recession in first quarter. Apart from March 2018, the latest PMI was the worst for almost 1½ years. Snow could not be blamed this time!https://t.co/94jWUWXCv1 pic.twitter.com/2iWGjntiP2— Chris Williamson (@WilliamsonChris) 4 March 2019
The FTSE 100 was supremely indifferent to the news, holding steady at 7,121, up 15 points (0.2%) on the day.
8.30am: Trade deal optimism engenders enthusiasm for equities
Optimism over a US-China trade deal underpinned London's leading equities on Monday.
The FTSE 100 was up 22 points (0.3%) at 7,128.
“European equities got off to a positive start to the week as US-China trade optimism had the necessary effect on risk sentiment, taking their cue from a solid Asian session and the positive close on Wall Street on Friday,” reported Neil Wilson at markets.com.
“Reports over the weekend signal that the two sides are moving rather more rapidly to a deal than we maybe thought. Trump has called for China to remove tariffs on US farm products because talks are going so well. Reports suggest Trump and his Chinese counterpart could sign a deal later this month. The fact that this would be at Trump’s gaff in Florida rather than outside the White House tells you a lot.
“But with all this positivity comes the risk that the market is buying on this rumour mill and is becoming more exposed should the good news not materialise. March could well come in like a lion and go out like a lamb ...” Wilson warned.
Bad day for the bad guys ????????— Gavin (@halcon_radiante) 3 March 2019
Canada appeals court orders tobacco firms to pay over 15 billion Canadian Dollars in damages
The judgment involves suits against Imperial Tobacco Canada, Rothmans Benson & Hedges and JTI-MacDonald.https://t.co/vr9GqZWhVr
The Blais action was brought on behalf of individuals who developed lung cancer, cancer of the larynx, the oropharynx or the hypopharynx or emphysema after having smoked specified quantities of cigarettes manufactured by the Imperial Tobacco Canada https://t.co/4ig1nY0kYU— Dr.Andrea East (@sixeast) 2 March 2019
British American Tobacco plc (LON:BATS) was a notable dissenter to the broader trend, shedding 1.5% at 2,819.5p after the Quebec Court of Appeal did not overturn the trial court's judgment against BATS's Canadian subsidiary, Imperial Tobacco Canada.
Proactive news headlines:
Plexus Holdings plc (LON:POS) told investors that its Russian licensee has secured its first major contract to supply the proprietary POS-GRIP wellhead gas exploration equipment to Gazprom. The contract, secured by licensee Gusar, covers the first of a possible five-year arrangement for programmes on the Kara Sea Shelf, where there are shallow water depths of less than 150 metres.
Active Energy Group PLC (LON:AEG) has bought a site in North Carolina to be the hub of its new Coalswitch business The Lumberton site is close to joint venture partner Georgia Renewable Power and comprises up to 415,000 sq ft of factory space and 151 acres of surrounding land.
Eckoh PLC (LON:ECK), the global provider of secure payment products and customer contact solutions, said it continues to bring in new contracts, with £10mln in new business secured since the end of September.
FFI Holdings Plc’s (LON:FFI) annual results this year to March will be lower than previously indicated due to weak revenues in the core film insurance business. The film insurer warned over trading in December but said contract timing issues, smaller budgets and reserves for possible claims will also affect results this year.
Jersey Oil & Gas plc (LON:JOG) told investors that drilling operations have now begun for the Verbier appraisal well, in the UK North Sea.
Brady Plc (LON:BRY) announced that Iain Greig and Daniel Look have joined its board as non-executive directors with immediate effect. The group said Greig is an experienced CTO and COO with a track record of delivering large-scale technology and business change programmes and commercial and operational leadership, having led the launch of LME Clear, the London Metal Exchange clearing house. It added that Look has almost 25 years of experience as a consultant in the energy and commodity sectors with a focus on trading and risk management, initially with Accenture before joining Baringa during its founding stage.
ADES International Holding PLC. (LON:ADES) the leading oil & gas drilling and production services provider in the Middle East and North Africa (MENA), has announced the appointment of Hatem Soliman as a non-executive director with immediate effect. The group said Soliman brings a wealth of international industry experience, having spent 36 years with Schlumberger after joining the company in 1982 as a graduate electrical engineer.
Block Energy Plc (LON:BLOE), the exploration and production company focused on the Republic of Georgia, said it has issued 1,846,791 new ordinary shares to settle £70,237 due to of outstanding creditors which includes advisors and consultants to the company.
6.45am: UK blue-chips expected to start broadly firmer
The FTSE 100 index is expected to open higher on Monday, extending Friday’s gains after strong performances pre-weekend on Wall Street and today in Asia amid ongoing US/China trade deal optimism.
Spread betting firm IG expects the blue-chip index to open around 25 points higher at 7,131, having added 32.00 points on Friday.
In New York on Friday, the Dow Jones Industrials Average ended 110 points, or 0.4% higher at 26,026, while the broader S&P 500 index gained 0.7%, both snapping a three-session losing streak.
The gains came after White House economic adviser Larry Kudlow said that President Donald Trump and Chinese President Xi Jinping could sign a trade agreement at their Mar-a-Lago meeting later this month.
The advances continued today in Asia, with Hong Kong’s Hang Seng index gaining 0.7%, while Tokyo’s Nikkei’s 225 added 1%.
Sterling weaker as Brexit date approaches
On currency markets, sterling fell back against the US dollar and the euro as investors continue to assess the latest twists in the Brexit saga and its impact on the UK economy.
A Confederation of British Industry report published on Sunday saw UK businesses report their weakest growth in nearly six years over the past three months due to fears of a no-deal Brexit and rising global trade barriers,
The CBI’s index of private-sector activity over the past three months dropped to -3 in February from zero in January, its lowest level since April 2013.
Domestic data due on Monday will focus on the construction industry, with the latest UK PMI survey on the sector due to be released at 9.30am, although Tuesday’s PMI report on the UK’s dominant services sector will probably be of more importance.
The main macro focus for the week, however, will be Friday’s January US jobs data which is forecast to see the unemployment drop below 4%, although with only 170,000 jobs created down from 300,000 in December.
Engineers provide Monday’s moving parts
On the corporate front, this week will bring another hotchpotch of blue-chip results amongst them a quartet of insurers, and a pair of bookies.
In a trading update in November, Rotork reported that sales increased by 10% on an underlying basis, in the ten months to October, but anticipated low single-digit growth for the final two months of the year.
Analysts at Peel Hunt expect Rotork to report year-on-year sales growth of around 7% for 2018, with a 40 basis points improvement in its EBITA margin to 20.7% giving a 12% increase in pre-tax profit to £140.0m.
For Senior, its trading update at the end of November confirmed that its Aerospace operations continued to benefit from growth in the large commercial aircraft sector and new product introductions.
Peel Hunt expects the engineer to report 2018 sales growth of around 3% to £1.055bn, with a 50 basis point improvement in the EBITA margin to 8.5% leading to an 11% year-on-rise rise in pre-tax profit to £81.0mln.
Significant announcements expected on Monday, March 4:
Economic data: UK construction PMI; US New York ISM manufacturing data; US construction spending
Around the markets:
- Sterling: US$1.3203, down 0.4%
- Gold: US$1,296.40 an ounce, unchanged
- Brent crude: US$65.36 a barrel, up 0.05%
- The Trump administration is close to agreeing to a revised trade deal with China that could be signed at a possible meeting between presidents Trump and Xi said to be being planned for this month – Financial Times
- Marks & Spencer chief executive Steve Rowe has launched a war of words against arch-rival Waitrose, insisting he can offer ‘better quality and better prices’ as he prepares for his new food delivery service – Mail on Sunday
- The departing boss of insurer Direct Line and the outgoing chief executive of travel retailer SSP are in the running to succeed Sir Charlie Mayfield as chairman of the John Lewis Partnership – Sunday Times
- Daily Mail and General Trust has announced plans to return almost £900 million to shareholders by offloading shares in financial publisher Euromoney – Financial Times
- Drax, the owner of Britain’s biggest power station, has admitted breaching environmental rules in the US after one of its wood pellet plants significantly exceeded air pollution limits – The Times
- The UK’s biggest housebuilders have admitted that the industry needs to do more to repair its reputation amid accusations of poor standards – Daily Telegraph
- Lord Bell, one of Britain’s best-known spin doctors, is to face a claim for more than 1mln over comments he made about Bell Pottinger and payments he received from the defunct public relations firm – The Times
- Jim Ratcliffe’s Ineos empire has paid a £1.2bn dividend - threatening fresh controversy after Britain’s richest man was embroiled in a tax-avoidance row – Sunday Times
- Activist investors Elliott Management and Starboard Value have reached a deal with eBay to add two new members to the board and launch a strategic review of the business – Financial Times
- Lyft has registered a near six-fold increase in its number of active users to 18.6mln in the past two-and-a-half years, and a doubling of revenues in the past year to $2.16bn as the car booking app races to IPO – Financial Times
- Vale’s chief executive has stepped down following pressure from prosecutors in Brazil investigating the company’s deadly dam burst in January – Financial Times
- Huawei’s chief financial officer Meng Wanzhou is suing the Canadian government, its border agency and the national police force over her high-profile detention - The Guardian
- Chancellor Philip Hammond is set to receive a multibillion-pound windfall for the public finances, increasing the chances of his promised “deal dividend” if MPs back the government’s Brexit agreement – The Times
- European investors have more than doubled investment in Britain over the past three years, despite uncertainty around Brexit – Daily Telegraph